Online ad fraud is apparently out of control.

A white paper released this week by AdAge and co-sponsored by anti-fraud company Spider Labs, estimates that ad fraud is stealing 20% (which comes to $66 billion) in global online ad spending.

 The report states, “the digital domain overall has seen a marked increase in fraud since the coronavirus first emerged….Along with the rise in scams like ransom-ware, trojan viruses and malware, ad fraud has also spiked dramatically.”

In another recent report, Prof. Roberto Cavazos, economist at the University of Baltimore, said “the level of ad fraud is now staggering. The digital advertising sector has … higher fraud rates than multi-trillion-dollar sectors…”

Prof. Cavazos’ comments came in a report issued by cybersecurity firm CHEQ which Cavazos participated in. The report estimates that ad fraud will create direct worldwide marketing losses of $35 billion in 2020. This is about a 50% increase over their estimate of $23 billion in direct losses in 2019.

Cavazos has spent over 30 years studying fraud across many business sectors. Last year he said, “I have studied the economic costs of fraud in many sectors for decades, and I was left stunned by the scale of fraud in online advertising.”

But, please, don’t tell that to our illustrious industry “leaders.” The crackpots at the ANA last year foreshadowed the “we’ve turned the corner” cluelessness of the White House with this gem: “Report From ANA And White Ops Shows War On Ad Fraud Is Succeeding.” If you need a good laugh, read it.

Some highlights from the CHEQ study:
– Online ad fraud has overtaken credit card fraud despite the fact that the credit card business is ten times the size of online advertising.
– While the direct cost of fraud will be about $35 billion, the total cost (direct plus indirect) could reach $40 billion.
– The report says, “Online advertising is uniquely susceptible to frauds…
– Between 10% and 30% of the $1.3 billion digital ad spending in the U.S. Presidential election was lost to ad fraud.

According to the ceo of CHEQ, “…fraudsters have ready access to the most advanced tools ever available to commit fraud at scale.”

But don’t worry! You’re not getting screwed. It’s all the other guys who are stupid! You are smart! You have processes… you have fraud protection…you’re smarter than the fraudsters! How can I be so sure? Your CMO told me.

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Bob Hoffman

Bob Hoffman is creator of the popular “The Ad Contrarian” blog and newsletter, named one of the world's most influential marketing and advertising blogs by Business Insider

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